USD/JPY Price Forecast: Dollar Holds 148 as CPI and Fed Cut Bets Clash With BoJ Tightening

USD/JPY Holds Near 148.00 as CPI and Fed Policy Shape Market Conviction

Macro Drivers Push USD/JPY Volatility Higher

The USD/JPY pair advanced to nearly 148.00 after U.S. inflation data and renewed geopolitical tensions kept the dollar in demand. The August CPI rose 2.9% year-over-year, up from July’s 2.7%, while the core CPI printed at 3.1%, in line with forecasts. Monthly gains of 0.3% for both headline and core confirm that inflation remains sticky. This data hit just a week before the FOMC decision, where futures markets price in an 88% chance of a 25 bps cut and an 8% probability of a 50 bps cut, bringing rates to the 3.75–4.00% range. At the same time, Japan’s own data offered mixed cues: the PPI rose 2.7% in August, GDP for Q2 was revised higher to 2.2% annualized, and household spending showed its first real wage increase in seven months. These numbers strengthened the case for the Bank of Japan to hike by year-end, keeping yen demand alive despite short-term weakness.

Geopolitical Risk Keeps Dollar Supported

Geopolitics remain a crucial tailwind for the dollar’s safe-haven appeal. Reports of Russian drones entering Polish airspace during the Ukraine conflict added urgency to risk hedging, pushing the USD Index (DXY) back toward 98.00. While the yen is traditionally viewed as a safe-haven, political uncertainty following Ishiba’s resignation created hesitation. A new prime minister could shift Japan’s monetary stance abruptly, leaving markets reluctant to fully price in aggressive BoJ tightening. This divergence has kept the USD/JPY pair well bid above 147.00 despite fragile U.S. macro fundamentals.

Technical Landscape Defines the Battle Zone

Technically, USD/JPY reclaimed ground after a failed breakdown attempt near 146.50. Bulls forced the pair above the 30-day SMA, and momentum indicators turned supportive. The RSI trades above 50, showing controlled bullish energy, while the MACD buy signal holds. Resistance sits at 147.94–148.13, followed by the 200-day SMA near 148.75 and the critical 149.00–149.15 range, where sellers previously reloaded. A sustained break above 149.15 could expose the psychological 150.00 handle, shifting the market toward a stronger dollar bias. On the downside, initial support lies at 147.00, with deeper levels at 146.30–146.20 and 145.35, before the pivotal 145.00 round figure. Failure to defend 146.20 would likely tilt sentiment bearish and open the door toward 144.50.

Fed-BoJ Policy Divergence Shapes USD/JPY Trajectory

The divergence between the Fed and the BoJ defines the longer-term bias for USD/JPY. The Fed is widely expected to cut three times before year-end, with cumulative easing priced near 68 bps, while Japan edges closer to its first meaningful hike in decades. The Reuters Tankan poll revealed Japanese manufacturing confidence at a three-year high, signaling resilience that could embolden BoJ hawks. Yet, as long as U.S. policy maintains higher real yields compared to Japan, capital flow dynamics favor the dollar. Investors remain reluctant to aggressively sell USD/JPY until the Fed confirms the pace of cuts. If September delivers a dovish pivot alongside firm BoJ guidance, USD/JPY could break its range decisively lower. For now, range-trading dominates between 146.95 and 148.50, with breakout potential tied directly to the CPI-Fed-BoJ sequence of events.

Trading Strategy and Rating

At current levels around 147.90–148.00, USD/JPY trades in a delicate balance between short-term bullish momentum and medium-term downside risk. A confirmed break above 149.00 favors bullish extension toward 150.00, while any sustained drop under 146.20 flips momentum to bearish. Given the CPI print, Fed cut expectations, and looming BoJ tightening, the pair is best rated a Hold, with tactical opportunities to Buy dips above 146.90 and Sell rallies against 149.00 resistance until a definitive macro trigger emerges.

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